Question

and poles. The sales price and variable cost for each follows: Product per Unit Snowboards $190 per Unit $330 $390 $60 Skis $240 Poles $30 costs shared by the three products are $249,200, how many units of each product will need to be sold in order for Salvadores to break even? Break-even per composite unit Number of Units per product Product Ratio (mix) Snowboards Skis Poles

Answer 1

Solution:

We need to calculate the weighted average contribution margin to solve this problem by using sales mix ratio.

Sales Mix Ratio

Total = 8+4+2 = 14

Snowboards = 8 / 14

Skis = 4 / 14

Poles = 2 / 14

	Snowboards	Skis	Poles
Unit Selling Price	$330.00	$390.00	$60.00
Less: Variable Costs	$190.00	$240.00	$30.00
Contribution Margin per unit	$140.00	$150.00	$30.00
x Sales Mix Ratio	8 / 14	4/14	2/14
	$80.000	$42.857	$4.286
Weighted Avg Contribution Margin per unit (80+42.86+4.29)	$127.14286
Total Fixed Costs	$249,200
Composite Break Even Units for the company (Total Fixed Cost / Weighted Avf CM per unit)	1960
Composite Break Even Units for company	1960	1960	1960
x Sales Mix	8 / 14	4/14	2/14
Break Even Volume Sales for each product	1120	560	280

Product	Ratio	Break Even per composite unit	Number of units per product
Snowboards	8	1960	1120
Skis	4	1960	560
Poles	2	1960	280

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